Just buy it
Apple has been phenomenally successful in designing and selling devices but it has? stumbled badly in developing its own social media. Apple is in great need to rectify its social deficiency.? One good way to remedy the situation is for Apple to buy Twitter.
Rumors have been rife over the last year that Apple will buy or take a major stake in Twitter.? The New York Times fanned the flames when it reported on Friday, July 27, that Apple had talked with Twitter in recent months about taking a stake in the micro blogging company. Worth noting is that the Wall Street Journal also reported last week of negotiations between Twitter and Apple but contrary to the Times, the?Journal reported that talks occurred more than a year ago.
Apple Deficiency
About 20% of the world?s population now uses social media.? By 2015 about 50% of the people are projected to use social media.? Social media has become a big influencer in the purchase of electronics.? This influence is likely to increase.
Apple stands alone among its competitors in that it does not have a major social media initiative.
Google has been working hard on Google+, which just crossed above the 250-million user mark.
On the Facebook earnings call, Mark Zuckerberg highlighted the importance of mobile efforts.? There have been plenty of rumors that Facebook will introduce its own mobile phone.? Facebook is also in bed with Microsoft.? The point is that Facebook will sooner or later bump up against Apple.
In addition to its relationship with Facebook, Microsoft has a social media component in its Xbox gaming network.
Amazon (AMZN) is rumored to be working on its own smart phone,? already very successful with its Kindle tablet.? Moreover, Amazon through its consumer reviews is already a stealth player in social media.
It is not that Apple has ignored social media.? Apple started its social network for music called Ping in 2010.? Apple tried to work with Facebook on Ping but the relationship did not work.? Now Apple has acknowledged that Ping is a failure and Apple is abandoning the effort.
Why Buy Twitter?
Buying Twitter will instantaneously give Apple a major presence in social media.? Twitter is reportedly worth about $10 billion.? A purchase of Twitter would hardly dent over $100 billion cash hoard of Apple.
Apple stock gets a low multiple because the company depends on producing hit after hit.? A purchase of Twitter will be an important new strategic initiative to produce stable earnings that are not dependent on hit after hit.? As a result, P/E of Apple may go up.
About Me:?I am an engineer and nuclear physicist by background. I founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at?The Arora Report,?which publishes four newsletters to help investors profit from change. Write me: Nigam@TheAroraReport.com. ?Follow me here and get email notification when I publish a new article.
Full disclosure:?Subscribers to The Arora Report are long Apple from $131 and have taken partial profits at $360, $525, $629?and $568.
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